College is a massive investment of time and money, so you should think of college in investment terms. Rather than resort to platitudes to see whether you should apply to scholarships, lets look at some numbers. While its not a gold rush, I think the math says it’s worth it.
The most pessimistic numbers I’ve seen say that only 1 in 10 undergraduate students gets a private scholarship. The average value of these scholarships is $2,800. While the government and schools themselves are much more generous (their total average award is $9,050), these aren’t the scholarships that require additional time filling out different applications. Most of those awards will be covered by you financial aid application and FAFSA.
Let’s make some assumptions to see if applying to private scholarships is worthwhile. We’ll use the pessimistic numbers to be conservative. First, lets assume only half of undergraduate students apply for these scholarships, so of those who apply 1 in 5 receive a scholarship. Given my experience with students and lack of better information, I would imagine even fewer apply, but again, I want to be conservative. That would mean 20% of those who apply get scholarship. To find your expected return, multiply the probability getting a scholarship by the average amount of the scholarship.
$2,800 x .2 = $560
Who couldn’t use $560?
That’s not the end of the story, though. If you have a 20% chance of getting a scholarship, that means you have an 80% of not getting a scholarship. If you don’t get one, you incur opportunity cost, which is the money you lost by spending your time filling out applications. What’s your opportunity cost? I can’t imagine it would be too great. Because most of you are young and unskilled, you don’t command a high wage in the market. If you worked, you’re probably looking at a $7.50/hour minimum wage job. I’ll be generous and say you could work for $10 an hour.
So lets assume you apply to 10 scholarships and it takes you 3 hours to apply to each scholarship. I’m just making these numbers up, but its worth pointing out that the more scholarships you apply to, the less time it will take to apply. You’ll have a number of application essays already written, and applying to additional scholarships might just mean filling out some personal information and making a few changes to an essay. For some, you’ll just change the name of the organization offering the scholarship in the essay.
Anyway, you spend 30 hours applying to scholarships, and you don’t get any. Was it worth it? Your opportunity cost was just $300 for a chance at $2,800. The math works out in your favor. Lets get the net expected return by subtracting the 80% likelihood of not getting anything from the 20% likelihood of getting a scholarship.
$2,800 x .2 – $300 x.8 = $320
What this tells you is that you are more likely to make money than lose money by applying for scholarships even with these conservative assumptions. I’d say the difference is substantial; $320 is a meaningful amount of money for a lot of people. Also note that your opportunity cost would need to more than double for it not to be worth your time. It’s not winning the lottery, but applying to scholarships is worth your time.
Take a look at these really important links about college:
- Majors that pay the most (and least)
- These colleges offer the best return on investment (here’s the list for Louisiana colleges)